The rapid acquittals of the president and the former vice president of Insituform East Inc. after a seven-week trial indicates that a federal jury rejected testimony by the key prosecution witness about a conspiracy to falsify the company's books, U.S. Attorney Breckinridge L. Willcox said yesterday.
The witness, Henry Hulse, 50, of Annapolis, was Insituform's former general manager.
"It appears they went back, took a straw poll and found they didn't believe Mr. Hulse -- so there was no reason to go further," Mr. Willcox said.
The jury took only four hours on Wednesday to acquit the two Insituform officials, who had been accused of conspiracy, fraud and insider trading in their sale of $3.7 million in company stock in 1986.
They were Arthur G. Lang III, 40, of Mitchellville, who almost single-handedly built the company in 1978 after obtaining rights to a new in-ground method of repairing underground pipes, and Thomas C. Trexler, 41, of Kensington, a certified public accountant and former chief financial officer, who left Insituform in 1988.
The prosecution tried to prove that the two defendants planned with Mr. Hulse to falsify the Landover company's books for the third quarter of 1986. The prosecution said the defendants counted unrealized profits to create a false picture of financial health and unloaded their stock before the market could react to the real figures showing a loss, which had to be revealed in the year-end report.
The defense characterized the disputed entries as honest differences of opinion about bookkeeping methods or as mistakes by an inexperienced staff in the rapidly growing company, which began over Mr. Lang's garage.
Mr. Lang obtained a franchise for a European process that uses a chemical solution and a liner to form a pipe-within-a-pipe, saving the expense and disruption of digging up broken pipes.
The company grew quickly after it won contracts throughout the mid-Atlantic region, including ones from the Washington Sanitary Sewer Commission, the Pennsylvania Department of Transportation and Baltimore City.
After the not-guilty verdicts on all 14 counts, Mr. Lang said he would return to work from administrative leave, while Mr. Trexler said he would begin job-hunting.
Mr. Hulse, whom the defense characterized as ambitious and bitter about a demotion, faces sentencing May 17 on his guilty plea to one charge of assisting in making a false filing to the SEC.
Stephen H. Sachs, Mr. Trexler's attorney, had told the jury in his closing argument that the case was a simple one, despite all the experts and evidence.
"It was a straight acquittal," said Mr. Willcox, commenting on his last case as Maryland's chief federal prosecutor. Last week, Richard D. Bennett was appointed acting U.S. Attorney while awaiting confirmation.